December 31, 2015

Banking For My Generation

Banking of the future [Source: https://www.youtube.com/watch?v=QY3_wcJcLZ8]

The British rock band The Who is probably best remembered for their breakout hit, 'My Generation,' in which Roger Daltrey sings: "I hope I die before I get old!" The song resonated so well in the 1960s because it was about a new generation of consumers, born in the second half of the 20th century, who were not bound by their parents' traditions.

The same goes for today's generation. I think Max Levchin really connected with the youth when he co-founded PayPal. Why? Because he loathes traditional banking and everything it stands for. Interestingly, Levchin also helped start Yelp, which crowdsources reviews about local businesses, and has invested in Evernote, a multi-platform note-taking app. What's common between all three is that these are businesses that put consumer convenience above everything else. That's important to grasp, because financial services companies like PayPal are addressing the needs of younger and digitally-savvy consumers. These are the sorts of consumers who do not want to stay in traditional hotels on their vacations but are opting for 'experience' stays on Airbnb. They want to use their mobile phones to book or share cabs on Uber. These also do not tolerate long lines at a bank branch or banker's hours.

For banks to remain relevant in today's day and age, they have to become 'friction-less'. It is estimated that some 80 percent of account closures take place even before the first transaction because of delays in processing requests. Adoption of automation is imperative for the integration of customer-facing processes like applications and onboarding. Citibank Brazil, for instance, reportedly achieved a 70 percent reduction in account opening times by automating customer onboarding in their commercial banking operations. While digital consumers would rather bank on the go and get real-time information about their account activity and wealth planning on their mobile devices, banks should also think about engaging their millennial customers within the branch. According to a study by Nielsen, customers are moving to mobile and digital channels within the brick-and-mortar space. So retail branch visits are still significant to a certain extent. An interactive wall that displays the stock market ticker, latest products, services, and comments by customers on social media might be the first thing a consumer encounters when he walks into a digital-ready branch. Teller pods might be installed alongside traditional teller lines to provide much-needed speed. On-the-spot access to online and mobile apps ca maximize the value of digital platforms. Even video conferencing with product specialists could enhance the product experience for customers.

According to a recent study by Richard Foster of Yale University, the average lifespan of a corporation in the S&P 500 is currently 15 years. Back in 1920s, that lifespan was 67 years. Enormous global banks would do well to take notice of just how turbulent the market is becoming. FinTech startups are doing things faster, more efficiently, and looking at the way banking is done in entirely new ways. Crowdsourcing, for one, is transforming how entrepreneurs seek out loans and connect to investors. Startups are also doing a lot of exciting work around blockchain technologies. Argentinian financier Wences Casares, who is an advocate of Bitcoin and the founder Bitcoin wallet and vault startup , cited frequent currency fluctuations in his native country Argentina as one of the reasons why he became a fan of cryptocurrencies. He says that there were times he couldn't receive wire transfers from his traditional bank due to Argentina's monetary troubles. Bitcoin made that possible.

Digitally empowered banks are recognizing that the more they enhance their digital capabilities and appeal to a new generation of consumers, the greater their digital footprint will be in a rapidly evolving market for financial services. And it is not just banks - nation-states are also catching up. This week Tunisia became the first country to offer its national currency for transmittance through cryptographic technology (will put the nation's currency on the blockchain). Surely, this is a sign of the times to come for my generation and the next!